ELECTRIC POWER BUSINESS

Outline and Strength

Since 2000 when the Gas Group started to generate and supply the electric power, it has engaged in a comprehensive range of business activities that extend from fuel procurement to power generation and sales. Among the new entrants to the sector following the start of its deregulation program, we own the largest power station in the Greater Tokyo Area and sell generated power to wholesale and large-lot customers. With the completion of deregulation of the retail electric sector in April 2016, we started electricity sales to residential and commercial customers. The complete lifting of the restrictions on region of operations or original business sector provided an enormous growth opportunity for our Group, which has a competitive power source portfolio and well established sales power. By our responding to customers’ needs for more affordable, reliable, and safe energy, we aim to significantly expand our electric power business and to raise corporate value (see details on the deregulation of the electric power and gas industries on page 15).

(Billion kWh) Objective: Selling about 10% Approx. 30 billion kWh 30 Approx. 10% of the of electricity demand in the Greater Tokyo demand Greater Tokyo Area

The Tokyo Gas Group has steadily increased its An increase 20 electricity sales volume, mainly in the wholesale of approx. 19 billion kWh segment. In the coming years we plan to expand sales to residential and commercial customers and raise our Electricity Sales Volume electricity sales volume from around 10 billion kWh at

present to about 30 billion kWh, 10.6 11.0 10.0 equivalent to about 10% of demand 9.7 10 8.3 in the Greater Tokyo Area, by 2020.

0 2012.3 2013.3 2014.3 2015.3 2016.3 2021.3

TOKYO GAS ANNUAL REPORT 2016 25 Business outline

Toward realizing our Challenge 2020 Vision Deregulation of the retail market, completing the program for Full Deregulated Market of the Electric Power and Gas Approximate Approximate electric power and gas deregulation, can provide the impetus Number of potential customers market size companies for the Tokyo Gas Group to greatly advance toward (Million) (¥trillion) expanding as a “total energy” concern. While completion of 10 85 8.0 the deregulation program for retail gas in 2017 is likely to Electricity Within intensify competition in the gas business, we are expecting to TEPCO’s domain 29 2.8 gain more earnings opportunities by entering the much bigger City gas 206 26 2.4 retail electric power market. In the Challenge 2020 Vision, we aim to evolve our total energy business including the electricity retail business, and expand the ratio of “electric Business Structure (Consolidated Net Income Ratio by Business) power, LNG sales, and other business” from 20% of Electric power, LNG sales, consolidated net earnings when the plan was adopted to and other business 25% by fiscal 2020. Overseas business Gas business 20% 25% Tokyo Gas Group’s strengths Fiscal 2009-2011 Fiscal 2020 The largest-scale and highly-efficient power Average Targets sources among the new power suppliers in the Greater Tokyo Area The Tokyo Gas Group now has the largest scale of power sources (1,600MW from 4 bases) among the new power suppliers servicing the Greater Tokyo Area. By adopting highly efficient gas turbine combined cycle (GTCC) generation, which offers superior energy savings, highly efficient power generation has been realized (a record high of Moka Power Station () LNG Terminal 58% realized at the Ohgishima Power Station). In addition, close proximity to the LNG receiving terminals enables efficient gas transportation.

Community-based sales network and over 11 million Kawasaki Natural Gas Power customer base Generation Co., Ltd. Ohgishima LNG Terminal/ The Tokyo Gas Group has established a community-based Ohgishima Power Co., Ltd. sales network with over 200 outlets in the Kanto region (operated by Tokyo Gas Lifeval, Enesta, and Enefit) enabling us to tailor services to individual customers’ needs. The Sodegaura LNG Terminal Tokyo Gas Baypower Co., Ltd. 10,000 employees of Lifeval, through whom there is direct interaction with those customers on behalf of the Tokyo Gas

Group, are engaged every day in meticulous services that Negishi LNG Terminal encompass from sales calls and maintenance of gas Tokyo Gas Yokosuka Power Co., Ltd. appliances to the opening and closing of gas fixtures in time of moving, gas appliance safety checking, and gas meter reading. Our push-type marketing, involving contacts with over 11 million customers at their homes and places of work, Sales and Service Network (Number of Outlets Operated by Tokyo Gas has benefitted us by enabling us to steadily gain contracts Lifeval, Enesta, and Enefit) toward becoming a No. 1 new electric power entrant in a Tokyo 107 competitive and newly deregulated market. Kanagawa 53 Infrastructure and management know-how system Saitama 24 In addition to the owned city gas business assets such as Chiba 11 LNG terminals, pipelines, and LNG purchasing capacity, the Gunma Tokyo Gas Group is capable of using distributed power 8 generations, including cogeneration and fuel cells, know-how Ibaraki 8 for management of electricity generation by use of LNG, and Yamanashi 3 experience in systematic business techniques from utility rate Tochigi calculation to billing and collection. 2

26 TOKYO GAS ANNUAL REPORT 2016 Future Initiatives Given Complete Deregulation of Retail Electric Power

In light of the objectives of the electric power system reforms and of the needs of customers, Tokyo Gas intends to establish a demand and supply structure that contributes to greater stability of supply, realize to supply affordable energy, and help diversify services offered to customers by undertaking a variety of measures to expand its electric power business.

Initiative Plan to Expand Power Sources (Own Equity)

Expand power sources Moka Power Station Approx. 3,000 MW Start-up of operations 01 (1,200 MW) Increase of approx. 1,400 MW Aiming at delivering electricity to low-voltage residential and (vs. Feb. 2016)

commercial customers, in addition to the wholesale market, Ohgishima Power Station Approx. Start-up of No. 3 unit 2,800 MW we plan to expand generation capacity from the current level operations (300 MW) of approximately 1,600 MW (company equity base) to around 3,000 MW by 2020. In addition to the Tokyo Gas Group’s Approx. power stations, it has been agreed that electric power 1,600 MW generated at Moka Power Station, which is under construction by Kobe Steel, one of the largest Independent Power Producers (IPP), will be supplied to Tokyo Gas. Adding to our competitive gas-fired thermal power sources and base load supply sources, we will also promote initiatives aimed at expanding renewable power sources in order to address to 2016.2 2019-2020 2020 (Plan) (Vision Targets) the issue of preventing climate change.

Recent Initiatives

Sep. 2014 Concluded an agreement with Kobe Steel, Ltd. for the supply of electricity from the Moka Power Station (1,200 MW; operations scheduled to commence from fiscal 2019)

Jan. 2016 Submitted the “Environmental Impact Statement” for the construction plan of the coal-fired thermal power plant (power generation scale up to a maximum of 2,000 MW by mid-2020s) of Chiba-Sodegaura Energy Co., Ltd. (investment by Idemitsu Kosan, 33%; Kyushu Electric Power, 33%; Tokyo Gas, 33%)

Feb. 2016 Ohgishima Power (investment by Showa Shell Sekiyu, 25%; Tokyo Gas, 75%) started operation of the No. 3 of Ohgishima Power Station, expanding the Tokyo Gas Group’s Power source to approximately 1,600 MW

Mar. 2016 Received the subsidy of Fukushima Prefecture’s wind power generation optimal location selection business and began a study of wind conditions.

Mar. 2016 Kawasaki Natural Gas Power Generation (investment by JX Nippon Oil & Energy, 51%; Tokyo Gas, 49%) submitted the Environmental Impact Statement for the Kawasaki Natural Gas Power Plant Units No. 3 and No.4 Enlargement Plan (power output of approximately 550 MW X 2 units, scheduled to start operations from 2021)

The Group’s Natural Gas-Fired Thermal Power Plants

Tokyo Gas Baypower Co., Ltd. Tokyo Gas Yokosuka Power Co., Ltd. Kawasaki Natural Gas Power Generation Co., Ltd. Ohgishima Power Co., Ltd. Tokyo Gas Tokyo Gas Tokyo Gas Tokyo Gas Generation capacity generation capacity Generation capacity generation capacity Generation capacity generation capacity Generation capacity generation capacity

100MW 240MW 420MW 407MW 100MW x 1 unit 100MW 240MW x 1 unit 180MW 840MW x 2 unit 400MW 1,221MW x 3 unit 900MW

Start of operations 2003 Tokyo Gas interest 100% Start of operations 2006 Tokyo Gas interest 75% Start of operations 2008 Tokyo Gas interest 49% Start of operations 2010 Tokyo Gas interest 75%

TOKYO GAS ANNUAL REPORT 2016 27 Business outline

ELECTRIC POWER BUSINESS

Initiative Initiative Expand electricity sales to high-voltage and extra-high- Expand electricity sales to 02 voltage customers 03 low-voltage customers

In October 2015, we established Synergia Power Co., Ltd., Following the full deregulation of the electricity retail sector in jointly with Tohoku Electric Power Co., Ltd. Synergia began April 2016, we began low-voltage electricity sales to electricity sales to high-voltage and extra-high-voltage residential and commercial customers mainly in our supply customers in the Kanto Region, mainly in its northern area. area, the Kanto Region. We sell electricity through the Tokyo Gas Group companies, such as Tokyo Gas Lifeval, Enesta, and Enefit, as well as through partnerships with companies in Tokyo Gas Group’s Electricity Sales Companies various industries, including nearby city gas and LPG suppliers and businesses in a range of other industries, including housing, construction, equipment, and telecommunications services.

Corporate name Synergia Power Co., Ltd.

Address 1-9-12 Kita Ueno, Taito-ku, Tokyo Offer one-stop electricity, gas and other value-added services Established October 1, 2015 The Tokyo Gas Group has established relationships of trust with over 11 million customers through its community-based Electricity retail supply to high-voltage and sales network, which tailor services to individual customers’ Main business extra-high-voltage customers in the Kanto needs at their homes and workplaces. The services include region, mainly in its northern area gas appliance safety checking and gas meter reading, gas Capital ¥495 million appliance repair and installation, and the opening and closing of gas fixtures in time of moving. In the electricity retail Shareholders Tohoku Electric Power 50%; Tokyo Gas 50% business, we will leverage our existing sales structure and relationships of trust with customers, provide more value to them, and take up challenges that may arise, whereby to raise the Tokyo Gas Group’s corporate value.

Corporate name ENNET Corporation

Address The Front Tower Shiba Koen, 2-6-3 Shiba Koen, Minato-ku, Tokyo

Established July 7, 2000

Main business Electricity trading and electricity generation

Capital ¥6.3 billion

Shareholders NTT Facilities 40%; Tokyo Gas 30%, 30%

28 TOKYO GAS ANNUAL REPORT 2016